Wednesday, August 17, 2011 10:43 pm

For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation’s worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – “18,000 … including Madoff,” as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency’s records – “including case files relating to preliminary investigations” – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website. “After you have closed a MUI that has not become an investigation,” the site advised staffers, “you should dispose of any documents obtained in connection with the MUI.”

Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The widespread destruction of records was brought to the attention of Congress in July, when an SEC attorney named Darcy Flynn decided to blow the whistle. According to Flynn, who was responsible for helping to manage the commission’s records, the SEC has been destroying records of preliminary investigations since at least 1993. After he alerted NARA to the problem, Flynn reports, senior staff at the SEC scrambled to hide the commission’s improprieties.

That’s right: To add farce to this tragedy, they’re trying to cover up a cover-up.

It’s a good thing Rick Perry is running for president on a platform of less regulation, or we’d be really screwed.

… is SIGTARP — the Special Inspector General at the Treasury Department who is responsible for rooting out waste, fraud and abuse in the federal bank bailout, going to throw the book at Tim Geithner??

[Neil Barofsky] has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York.

The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges.

In Senate Finance Committee testimony on April 20, Barofsky said SIGTARP would investigate seven AIG-linked mortgage-related securities similar to Abacus 2007-AC1, the instrument underwritten by Goldman Sachs Group Inc. that is at the center of a U.S. Securities and Exchange Commission lawsuit filed against the investment bank on April 16.

Leading the Charge

“I’ve been in contact with the SEC,” he told the committee. “We’re going to coordinate with them, but we’re going to lead the charge. We’re going to review these transactions.”

Barofsky and Geithner’s offices have gone toe-to-toe over AIG, alleged lax oversight of TARP funds and even over the question of whom Barofsky reports to.

Barofsky, a former federal prosecutor who was once the target of a kidnapping plot by Colombian drug traffickers, says he’s also looking into possible insider trading connected to TARP.

But that’s absurd, because no American banker would be such a cad and bounder as to run out and buy stock in his own bank before word of an impending federal bailout of that bank became public, would he?

Both Barry Ritholtz and Bill Fleckenstein think the SEC ought to sue not only Goldman Sachs but also the Financial Accounting Standards Board, whose accounting rule changes have so degraded accounting standards that companies, even publicly traded ones, essentially are bound by no rules. Want to know why Citi, Bank of America and probably Wells Fargo haven’t been taken over by the government even though they’re basically insolvent? Because the FASB is allowing them to carry loans on their books at roughly three times their probable market value.

As far as investors are concerned, (FASB has) have eliminated (standards). There is essentially no oversight of companies by accountants any longer. Accounting statements are all but worthless. Frauds like Enron, Lehman Brothers and Overstock.com are everywhere. Companies can hide risk from investors, misstate earnings without fear of reprisal, engage in any manner of deceptive gamesmanship.

There are many reasons to buy various publicly traded companies — but what they report in their balance sheets ain’t one of them.

Friday, April 16, 2010 8:35 pm

Goldman Sachs Group Inc. was sued by U.S. regulators for fraud tied to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. The firm’s shares tumbled 13 percent and financial stocks slumped.

Goldman Sachs created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicles, the Securities and Exchange Commission said today. Billionaire John Paulson’s firm earned $1 billion on the trade and wasn’t accused of wrongdoing. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president who helped create the CDOs, known as Abacus.

“The product was new and complex but the deception and conflicts are old and simple,” SEC Enforcement Director Robert Khuzami said. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

So: Who shorted Goldman Sachs before today?

Also: I’m going to hit the Eternal Snooze button here by asking to be awakened when, and only when, criminal trials of individual, high-ranking Goldman Sachs executives begin. This is all for show, just like the “finance reform” Congress is playing at. If it goes anywhere, it’ll be settled for a few lousy million without any individual or corporate admission of wrongdoing.

If Matt Taibbi, the Rolling Stone writer, were U.S. attorney for the Southern District of New York, he could’ve gotten two dozen Goldman execs indicted by now. And if Eliot Spitzer, instead of becoming governor and purchasing hookers by the litter, were still New York State AG, he’d already have done it.

OK, Cassandra wasn’t Greek, she was Trojan. But she was the chick to whom the god Apollo gave the gift of prophecy … and, because she then wouldn’t be his girlfriend, the curse of never being believed.

Harry Markopoulos can relate. He was a money manager who was ordered by his bosses to find ways to equal Bernie Madoff’s return on investments. He calculated that it was statistically impossible, then spent years trying unsuccessfully to bring the wrath of the Securities & Exchange Commission down on Madoff. It turns out that Markopoulos was right, that the reason Madoff’s “returns” were so high was because he was running a $65 billion pyramid scheme that cost a lot of people (including, I am reliably informed, some folks right here in River City) a ton of money, and that the SEC was “comatose” (if not on the take, I hypothesize).

Why do you think the S.E.C. failed to wake up to Madoff’s $65 billion Ponzi scheme until he turned himself in?
They weren’t even asleep at the switch; they were comatose. They didn’t respond to heat and light, much less evidence of wrongdoing. They were not engaged in the fight.

This was when William Donaldson was head of the S.E.C.?
Donaldson was too tough on Wall Street, so he got the ax. Then you had Christopher Cox, because he wasn’t going to do his job. That’s why he got the job.

You met last year with Mary Schapiro, the current head of the S.E.C. How did that go?
I would say she was coldly polite. Her general counsel, David Becker, did most of the talking. He and I did not get along at all. He was getting ready to come across the coffee table and strangle me.

Punxsutawney Phil weighs in on this whole Groundhog Day thing. Spoiler: He is, profanely, obscenely, NSFW-ly not a fan.

Bestest snow in a decade: The night we moved into our current house in January 2000, we got what likely will be a strong contender for snowstorm of the century. This past weekend’s storm, which dumped better than 6″ on us and close to a foot not far north of here, was almost as good. Got to go sledding and have a snowball fight with the kids — they killed me. Enjoyed Cajun crab-corn chowder and other good eats with good friends. Settled into a warm armchair Sunday night with a great novel and some Nattie Greene’s Red Nose winter ale. Ahhhhh.

Has prop trading really killed even one bank? Tennessee Sen. Bob Corker asked that question today. The answer is yes: Merrill Lynch, which the Fed bribed Bank of America to take over. (That transaction itself has raised all manner of, for BAC officers/directors, ugly questions about what stockholders were and weren’t told about the ML takeover.)

The Fed: One big counterfeiter, basically. Which, honestly, is sort of what I had thought, except that I figured there were important distinctions that were eluding me on account of I’ve got the economic skillz of a cinder block. Turns out I was more right than I knew, which does NOT make me feel as good as you’d think.

Not that what people want actually matters, but health-care reform with a public option is more popular even among Republicans in swing districts than the current Senate bill, which lacks one. And to no one’s surprise, although at least 51 Democratic Senators are on record as supporting a public option, now that reconciliation (i.e., simple majority vote) could make it happen, some of those “backers” are backpedaling, lest they upset their corporate overlords.

As is often the case, The New York Times’ David Brooks is guilty of slopping thinking. Matt Taibbi dopeslaps him back in the direction of reality and, in the process, puts in a shout-out for factual journalism over the false equivalence of “objective” journalism.

If you believe this, 26 states, including North Carolina, are insolvent. I don’t know whether to believe it or not, but, lord, it wouldn’t surprise me at this point.

I suppose it’s possible that repealing “don’t ask, don’t tell” will disrupt some military units … which is what desegregation opponents in the military warned Harry Truman 60 years ago. And as the fictitious Chairman of the Joint Chiefs on “The West Wing” observed, “You know what? It did disrupt the unit. The unit got over it.” More to the point, so, basically, did all the senior witnesses who testified before Congress on the matter today.

Why the hell isn’t someone under indictment for this?: The CIA is allowing some of its personnel to moonlight for private, for-profit corporations. This isn’t bad only because it divides CIA staffers’ focus/attention, although that division is, indeed, a bad thing; it’s bad because it gives certain corporations access to government secrets they’re not entitled to have.

Why, it’s almost as if someone’s looking out for the taxpayers’ interests: Defense Secretary Robert Gates has fired the head of the $350 billion F-35 program because of cost overruns and performance issues. He also has withheld hundreds of millions in payments to Lockheed Martin, the prime contractor on the fighter jet. There’s gotta be a catch; I just haven’t figured out yet what it is.

I personally think Khalid Sheikh Muhammad should be tried in New York City, and I think people who think otherwise for any reason other than the cost of security are incontinent. And here’s what I would call a conservative argument in favor of trying KSM in, if not in New York City proper, at least in a civilian federal court elsewhere within the Southern Judicial District of New York. And here are some other reasons why letting the White House, Congress and local officials butt into this is a bad idea.

Colorado Springs tries an interesting social experiment:Rather than raise taxes, the city is letting a third of its streetlights go dark, letting dozens of police and firefighter positions go unfilled, not paving any streets and cutting all kinds of other services. I am sincerely interested in seeing what happens with this.

Supposedly we now have a study that says abstinence-only sex education works: Except for the part where the program studied — which might, in fact, work, although I’d say more study is needed — was not, in several important ways, abstinence-only. More details here. This isn’t just apples to oranges, it’s apples to mountain oysters.

As does Sarah Palin, whose PAC spent more money in the last half of 2009 on copies of her book than it did in contributions to other political candidates, ostensibly the PAC’s primary purpose. For those of you following along at home, this is a way of funneling political contributions to her PAC straight into her own pockets.

Question of the day, from Eli: “… if only one political party’s base gets to be taken seriously, does it really have to be the one that parades around with pictures of the President Of The United States dressed as a witch doctor?”

What could possibly go wrong? A Michigan man with a sled tried to fashion a rocket pack out of an old car muffler, gasoline and gunpowder. Police say he had been … wait for it … drinking. (h/t: Nance)

And people think I’m crazy for suggesting that Obama is as bad as Bush: Marcy flags something that the Washington Post’s Dana Priest wrote down but apparently failed to grasp the significance of: “Somewhere there’s a list of Americans who, the President has determined, can be killed [by their own government] with no due process.” OK, I’ll say it: Impeach him. I’m dead serious. Because if what Priest reportsis true, the president has illegally and extraconstitutionally conspired to commit murder.

Think George W. Bush will watch on teevee?: Britain’s former prime minister Tony Blair testifies Friday in the inquiry into that country’s decision to join the war in Iraq. Even if he escapes indictment — and that is far from certain — Blair’s place in British history appears sure to fall into the Brit equivalent of Warren Harding country.

Cue ominous music: The SEC voted 4-1 today to suspend automatic redemptions from money-market funds. People who value these investments for their liquidity now have no reason to value them. Let the stampede begin. What’s the larger meaning? I have no idea, but I’m about 98% sure it ain’t good.

The banksters screw us again: Citi temporarily tamped down some of the criticism of its big bonuses by announcing that every part of anyone’s bonus over $100,000 would be paid in stock, not cash. The idea is, you tie employees in to the company’s goal of long-term growth and profitability. Which would be great if the stock weren’t redeemable for a couple or three years. But this stock? Will be redeemable in April. As stock bonuses go, that’s practically cash.

How the banksters screwed us the first time: The so-called “Schedule A,” the list of crap mortgage-backed securities that the New York Fed took off AIG’s hands at 100 cents on the dollar when they were actually worth around half that, has finally been made public. Not sure exactly what it will mean, but inasmuch as the NYFRB tried to keep this list secret until 2018, you can be reasonably sure it’s nothing good.

Smoking gun: Goldman Sachs could and should have had to eat some of its bad investments in 2008, but the New York Fed let it off the hook, documents show. That’s the same New York Fed then run by our current SecTreas, who REALLY needs to be returned to the private sector posthaste. Oh, wait: He has been a “public servant” his whole life. Well, that’s OK. After what he appears to have done for Goldman, they should pay him a princely sum for life and not even require him to show up for work. Then they’d have a slight taste of how we taxpayers feel, except for the part where they NEVER ACTUALLY DID ANYTHING FOR US, not that I am bitter.

Cops bumping into each other: Joining the House Oversight Committee in looking into the New York Fed’s bailout of Goldman Sachs and AIG is Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program, better known as the bank bailout program, who testified today before Congress.

Oh, and lookee what Mr. Barofsky had to say: “According to these [Federal Reserve Bank of New York] executives, then-President [Tim] Geithner ‘acquiesced’ to the executive’s proposal. When asked by [Barofsky’s office] if the executives felt they had received their ‘marching orders’ from then-FRBNY President Geithner to pay the counterparties par [instead of the roughly 48 cents on the dollar they actually were worth], one FRBNY official responded ‘yes, absolutely.'” But … but … Geithner and the White House both say Geithner wasn’t involved in the decision to screw taxpayers by paying AIG customers (including Goldman Sachs) more than they should have. So somebody’s lying. And Barofsky’s the one under oath.

Memo to commenters on this article: Genocide is not a contest. There is no prize.

If Steven Pearlstein were president, he’d say the state of the union sucks.

Mixed blessing: In his article “Appalled in Greenwich Connecticut [sic],” downloadable (.pdf) from his site StumblingonTruth.com, Clifford Asness of AQR Capital Management, whom I have not read before, combines grossly unfortunate metaphor (“Unfortunately for this President, he will, I hope, find the financial community not cowering from his Cossacks on a shtetl in the Pale of Settlement (Greenwich, CT), but meeting his accusations with logic and patriotism.”) with both an entitlement mentality AND common sense (“So, how do you fix too-big-to-fail? Well, this is complicated, give me a moment. I got it. You let them fail.”). For a quant, he manipulates words real purty. I may return.

Tax the rich! Tax the rich! Oregon’s doing it. Sort of. A little.For the first time in 80 years. But the media is all Scott “Our Next President” Brown, so if you don’t hear about this, that’s why.

Wrong AND lame: President Obama’s proposed 3-year freeze on domestic discretionary spending is not only exactly not what the economy needs in a time of depressed consumer demand, it’s also almost meaningless in its effects on the budget deficit, given that it doesn’t affect big-ticket items like defense, wars, interest on the national debt or entitlements. It’s one more example of trying to appear to people who believe you incapable of doing the right thing that you’re doing the right thing. You will never win those people over, so you ought to just go ahead and do the right thing. Simpler. More effective. Pisses off the people who are wrong. Everyone’s a winner.

And if you want to look for budget savings, here’sasuggestion. Even George W. Bush’s last Defense Secretary thinks we’re spending too much on defense, and spending it the wrong way. Observes Spencer Ackerman, who covers this stuff for a living, “Everyone in Washington who studies the Pentagon budget quickly finds gobs and gobs of wasteful spending. Not some people. Not dirty hippies. Every. Single. Defense. Analyst.”

Can we like ACORN again? Reminder: O’Keefe’s videotapes were doctored. And August J. Pollak’s commentary on the case is short enough and good enough for you to hie thee hence and read it in its entirety. Go on. I’ll wait.

(pause)

Oh, good, you’re back. Moving on, then …

Conflict of interest: Tyler Durden points out reason to believe that Senate Majority Leader Harry Reid has a quite personal reason for wanting to see Bumbling Ben Bernanke reconfirmed as Fed chairman as early as Thursday.

Whoops! Not so fast, there, Fast Harry: Sen. Jim Bunning, R-Ky., claims to have documents showing that Bernanke overruled his advisers in approving the AIG bailout. And here we thought Harry Reid was just venal. Y’know, nothing is becoming Jim Bunning’s Senate career like his leaving of it. Maybe the old guy is going senile, but he’s actually, at long last, acting in the public interest here. Or maybe he just hates Democrats. Either works for me.

Hard cases make bad law, and this hard case has led a judge to make some awful case law.

You might want to put down the knife, Ms. Quinn, because the Secret Service does NOT mess around:Obama has been advised to make sure the bunny is secure. Commenter El Cid at Balloon Juice adds, “I think it’s kind of funny that Sally Quinn goes to the trouble of asking her readers to ‘indulge [her] for a moment’, as if that woman spends the tiniest femtosecond of her life not being indulged.” And this would be funny if every other Washington journalist weren’t just like her.

The public option: C’est popular. Corporations: pas tellement: In a Research 2000 poll in 10 swing congressional districts whose seats are currently held by Democrats, a majority of Republicans favor a public option, and a plurality of Republicans, 43%, say Democrats need to do more to fight big corporations. In the single N.C. district polled, Larry Kissell’s NC-08, voters overall favor a public option by 73% to 16%, with 11% undecided, and a 59% majority of voters, the biggest majority of any of the 10 districts, said Democrats need to do more to fight big corporations. It’d be interesting to see the results if the vague “big corporations” was changed to “banks” or “health-insurance companies” or both.

Against it for all the wrong reasons: Polling ace Nate Silver points out that part of the reason health-care reform isn’t polling as well as its supporters wish is that sizable chunks of the population believe (bad) things about the bill that are objectively untrue.

Why wouldn’t a combination of high-deductible health-insurance plans and Health Savings Accounts fix the problem? That’s pretty much the question one of my cousins asked me in an e-mail the other day. Well, Nancy, here’s your answer.

Good news, for a change, for vets: Iraq and Afghanistan vets suffering from post-traumatic stress disorder but denied monthly disability benefits from the VA can join a class-action lawsuit to get their disability ratings increased to the level required by law, which will make them eligible for benefits. The relevant law was quite clear on what disability rating vets with PTSD are supposed to be assigned, so the fact that someone even had to sue over the issue is a disgrace and an outrage.

CBS: Morons: They won’t let people run factual advertisements about George W. Bush’s war crimes, but they’ll let Christianist wingnuts Focus on the Family run a forced-pregnancy ad during the Super Bowl. I think maybe I’ll just skip the game, then — all the best parts (i.e., the other commercials) will be on YouTube next day anyway. Also, I hope all the fans of Tim Tebow, who’ll star in the commercial, read this. The money quote comes from “an NFC South talent evaluator” who is most likely with the Bucs, since the Saints and Falcons are fixed for starting QBs and the Panthers have neither the money nor the draft pick to go after a potential first-round QB.

Don’t don’t-ask-don’t-tell: That well known military-hater, retired Gen. John Shalikashvili, who implemented “Don’t Ask, Don’t Tell” as chairman of the Joint Chiefs of Staff, says it’s time to repeal the military’s ban on openly gay people. I’d say that time actually was 1775, but I’m happy to welcome J-Shal to the bandwagon.

The lessons of Stuyvesant Town: But by all means, let’s re-confirm Ben Bernanke. Jesus wept.

You’re looking at the performance of Apple stock earlier today. That big dip came right around the announcement of the iPad. I’m not sure what it means, but I’m pretty sure it ain’t what the Apple board expected.

Best. Apple. Humor. Ever.:The Wikipedia Entry for the iPad (until today): “iPad was a prototype for a feminine hygiene product that purported to digitize a woman’s menstruation cycle and store it on a password-protected Web server.[1]” More iPad humor here, but guys may want to give it a miss.

Keith Richards, sober? Because he was so upset by how hard Ron Wood fell off the wagon? I think The Awl says it all: “If Keith Richards stops drinking because he thinks you have a problem, well, you have a problem.”

Enron may be dead, but its ghost continues to mess with us: “White House and Congressional Democratic leaders say they now believe that they have the 60 votes needed to block a filibuster of Mr. Bernanke’s reappointment.” … “… strategy on the Bernanke confirmation was being led by former Enron lobbyist Linda Robertson, who is viewed as an effective advocate for the banking chief on Capitol Hill.” But don’t worry — the president’s going on TV Wednesday night to assure us he feels our pain.

Heckuva job, Bernanke: The Fed is required by law (12 U.S.C. § 225a) to manage monetary policy so as to create jobs for as many people as possible. True story. It also is required to report semiannually on what steps it has taken to comply with this and other requirements. What did its most recent report say about creating jobs? Not bloody much. So explain to me again why this guy should get another four years in the job.

You can pay me now or pay me (a lot more) later: Cutting early-childhood programs hurts jobs now, costs society more later, research shows. My experience covering politics leads me to believe that the kind of people who oppose this sort of spending are not, in general, the type who tend to be convinced by science/research, but, what the hell, I’ll post it anyway.

If anything more progressive than the Senate health-care bill is politically dangerous for Democrats, then why is the guy charged with getting Democrats elected to Congress telling Obama and the Senate to shove it?: Maybe because he has seen this polling. Retiring Rep. Marion Berry, D-Ark., on the other hand, clearly has not.

Speaking of real estate, the biggest real-estate transaction in history has gone into default. Corollary: Apparently it’s OK for real-estate giant Tishman Speyer to walk away from its debts, but don’t try this with your underwater home, kids.

Prisoner’s dilemma, in that everyone who doesn’t work for Goldman Sachs is kind of a prisoner of everyone who does: Goldman Sachs’s chief bull, Jim O’Neill, has gotten somewhat ursine. So does that mean that they know the economy’s going to get worse because they’re running it, or does it mean they want us to think they think it’s getting worse so that they can bet on improvements, engineer those improvements, and win? Decisions, decisions.

Priorities in a post-peak-oil reality, from James Kunstler: “The money that went into propping up the automobile companies could have been used to rebuild the entire railroad system between Boston and the Great Lakes, and the capital squandered on AIG and its offshoot claimants could have rebuilt everything else the rest of the way to Seattle. Is it really so hard to imagine what history requires of you?”

Memo to Harold Ford: Hell, no, we’re not going to cut taxes for you and your rich friends. In fact, jackhole, you’re lucky this country does not tax Stoopid. Hey, do me a favor, dude: PLEASE run for Senate from New York with that platform. I could do with a laugh.

Espwa: Our church supports an orphanage in Haiti, Espwa (which means “hope”). The orphanage has a blog. The residents and staff, through (literally) shaken by the earthquake, escaped injury, although several lost loved ones elsewhere in the country. Moreover, the orphanage gets all its food and supplies overland from Port-au-Prince, and it’s not clear right now whether the roads are passable, let alone what shape the city’s shipping infrastructure is in. You can contribute online here.

Steepening curve … and not in a a good way: A month ago, the Mortgage Brokers Association was predicting that its members would originate 24% less in mortgages in 2010 than 2009. Now, they’re saying that figure will drop 40%, from $2.11 trillion in 2009 to $1.28 trillion in 2010. That’s the lowest level since $1.14 trillion in 2000.

A clawback, but not for the taxpayers: A large pension fund has sued Goldman Sachs over its bonus policy, asking that money that would be going to Goldman employees go instead to it. Where that budgeted $22 billion in bonus money really needs to be going is the taxpayers, inasmuch as fully two-thirds of Goldman’s 2009 revenues were more or less directly attributable to taxpayers. But I suppose the retirement savings of cops and firefighters is a more productive place for it than Goldman execs’ pockets. And that is where the money (much of it, at least) will go, because Goldman will settle this toot de suite. It does not want its folks answering questions under oath.

A nation of pants-wetters, or, that high-pitched whine you hear is Ben Franklin (“He who would give up liberty for safety deserves neither … and shall have it”) spinning in his grave fast enough to light up Pittsburgh: A majority of Americans want to give up civil liberties to make themselves safer. Cheese and crackers, people, what are all the GUNS for … to HIDE BEHIND? MAN. UP. Or else the terrorists really do win.

Memo to aides to Massachusetts Dem Senate candidate Martha Coakley: I realize that losing Ted Kennedy’s Senate seat to a guy who posed nude for Cosmo might make one’s candidate a bit, um, testy, but still, don’t shove reporters. Or move to China if you want to do that stuff.

Jan. 23 is National Pie Day. I think I may head over to K&W and have some of the chocolate-creme to celebrate.

From Facebook’s Overheard in the Newsroom: Design Editor: “I want the font that makes people addicted to reading newspapers again.” Commenter Bruce Reuben: “The font would have to be made of crack.” Lex: “The font that looks like kick-ass, take-names accountability journalism. Yeah. That. Also.”

Harold Ford: Strikingly un-self-aware. I’m not a huge fan of Sen. Kristen Gillebrand, but having lived in NY I think she’s far more in tune with people than Ford is. As someone else put it, there’s a reason Alabama doesn’t send gun-confiscating atheists to the Senate.

Tucker Carlson won’t tell you, so I (and Crooks & Liars) will: His new site, The Daily Caller, will have a whole section devoted to “environmental scepticism” [sic]. His primary funder — $3M in the first year alone — is a huge global-warming denier.

Now it’s up to Harry Reid … and Barack Obama: Arlen Specter says he’ll back Dawn Johnsen to head Justice’s Office of Legal Counsel. So that’s 60 votes. Let the flushing of the Aegean stables begin.

What I’ve learned from reading about “Game Over” (besides the fact that I don’t want to read the whole book): You can make a lot of money publishing anonymous, 2-year-old gossip. And in real life, people who are dying of cancer and whose spouses are cheating on them don’t always behave as nicely as their Movie of the Week counterparts. OK, I already knew that last one.

I think this comment from liveblogger Teddy Partridge tells you all you need to know about the competence of counsel for the bigots defense in the California gay-marriage trial: “Sorry, this lawyer is asking really long questions and requiring YES or NO answers which makes liveblogging almost impossible”

Busted: The American insurance industry, while publicly claiming it favored health-care reform, was giving money to the Chamber of Commerce to produce and air anti-reform TV commercials. I am shocked, shocked, etc. Someone explain to me again why it’s a good idea to point a gun to American taxpayers’ heads and make them give these companies money. Someone else explain to me why the Chamber and the insurance trade group should get to keep their tax exemptions, kthxbai.

Speaking of health care, there’s this notion floating around that taxing health benefits will lead employers to give more to employees in the form of wages. However, this notion is not true.

Quote of the day, from Sen. Harry Reid: “I have no regret over calling [former Fed chairman Alan] Greenspan a political hack. Because he was. The things you heard me say about George Bush? You never heard me apologize about any of them. Because he was. What was I supposed to say? I called him a liar twice. Because he lied to me twice.” Cue Republican efforts to frame this comment as a “gaffe” in 3 … 2 …

This thing where Giuliani said there were no terrorist attacks on the U.S. under Bush? That was no one-time bit of misspeaking. That was an emerging Republican meme. Guys, Goebbels was a cautionary tale, not an exemplar.

Some judges just need impeachin‘, starting with Warren Wilbert, the Kansas judge in the murder trial of Scott Roeder, who assassinated* abortion doctor George Tiller. Wilbert will let Roeder argue that his killing of Tiller actually was voluntary manslaughter because, in some parallel universe, Roeder wordlessly put the barrel of a .22 to Tiller’s head and pulled the trigger because Tiller was doing something besides providing a legal and needed medical service. I hope I’m wrong, but I fear Wilbert just declared open season on abortion providers.

War crime: An independent Dutch commission finds that the 2003 invasion of Iraq, and therefore the Netherlands’ support of same, “had no sound mandate in international law.” Somewhere, Dick Cheney’s shriveled testicles shrivel a little more.

The SEC mans up. Oops, no, wait, not really: The Securities & Exchange Commission asks the court for permission to file additional charges against Bank of America for failing to disclose Merrill Lynch losses to BofA shareholders before a takeover vote. And yet it also says no individual(s) can be held legally responsible for the royal hosing those shareholders received. All the deceit and fraud somehow just … happened, I guess. Yet one more reason why corporations, legally speaking, shouldn’t be people.

Pecora for the new millennium: A list of questions the banksters should be asked tomorrow by the Financial Crisis Inquiry Commission (also called the “New Pecora Commission,” after the panel that looked into the causes of the Depression), but almost certainly won’t be.

Anything that annoys the Financial Services Roundtable is probably a good idea: Obama considers taxing banks that got TARP money. It should happen … which means I’ll believe it when I see it.

“I am not a hero.”: The hell she says. Miep Gies, the Dutch woman who helped hide Anne Frank’s family and other Jews from the Nazis and later preserved Anne’s diary, is dead at 100.

He was not necessarily a hero, but he was one bad dude: Old-time Coney Island strongman Joe Rollino, who celebrated his 103rd birthday by bending a quarter with his teeth, is dead at 104. But only because he got hit by a minivan.

To see, or not to see: The Supreme Court supposedly will decide tomorrow whether to allow 1) closed-circuit broadcasting of the trial of Perry v. Schwarzenegger (the gay-marriage lawsuit) in other courthouses in California and/or 2) allow video to be posted to YouTube. Here’s some factual and legal background (more here); both writers think the Supremes, who don’t want their own proceedings broadcast, see this as a slippery slope. I bet they’re right.

Another quote of the day, from washunate at The Seminal: “… the past three decades have witnessed the slow and steady transfer of the wealth generated by labor’s productivity into the hands of a few select families of already great wealth. If anything can capture an image of the consequences of the Reagan-Bush era, it’s gotta be 225 million Americans in 1979 buying more vehicles than 308 million Americans in 2009.” Yup. In absolute numbers, almost 33% more. Heckuva job, Georgie.

Harry Reid v. Trent Lott: To elaborate a bit on a comment discussion Fred and I had in a previous thread: What Harry Reid said about Obama was grossly awkward and inept, but he said it in a context of praising Obama. What Lott said, on the other hand, was praising a segregationist. These two things are not logically, linguistically or morally equivalent.

Guantanamo v. the Constitution: Those party animals at McClatchy News Service have served up a pyrotechnic package of print (with a whole bunch o’ Web stuff, too, including source documents) in observance of the eighth anniversary of the incarceration of the first terrorism suspects at Gitmo. The series touches on subjects ranging from holding, and torturing, innocent people to the Taliban’s influence within the prison (yeah, you read that right).

Afghans v. everybody else: Incredibly mixed findings in this ABC News poll from Afghanistan. They hate both us and the Taliban. They almost unanimously think their government is corrupt, but they actually support President Hamid Karzai more than they used to. And they’re about evenly divided over whether civilian deaths are more NATO’s fault or more the insurgents’ fault for mingling with civilians.

Perry v. Schwarzenegger: Gay marriage on trial — literally: The lawsuit Perry v. Schwarzeneggerwent to trial today in U.S. District Court in San Francisco. At issue is the constitutionality of Proposition 8, enacted last year by referendum to deny the right of marriage to couples of the same sex in Cali. Expected to last about 3 weeks — with the case likely to end up before the Supreme Court no matter who wins. Your all-purpose source for trial info is here, and if the opening arguments are any indication — which they may or may not be — gay-marriage proponents are headed for a big win.

Law enforcement v. the drug war: A lot of former cops, judges and prosecutors have endorsed legalizing marijuana in California, where a legislative committee is scheduled to vote on just that next week. Whether the full legislature passes the bill may be immaterial, though; an initiative to regulate and tax pot is on the November ballot and expected to pass.

Congresscritters v. reality: About six in 10 Americans say terrorists probably will find some way to strike us again. Unfortunately, that’s probably correct, but you wouldn’t know it to listen to some of the Congressional Republicans who are suggesting that 1) we should all be peeing in our pants over the guy who nearly set his crotch on fire and 2) that if you torture enough people and bomb enough civilians, all terror can be prevented.

Our arrogant national culture is letting our soldiers/marines die unnecessarily: “Indeed, off-the-shelf solutions [to military problems in Iraq and Afghanistan] were there for the asking within Coalition partner states, but no one asked.”

Some good news for a change: “Q: Obama says America will go bankrupt if Congress doesn’t pass the health care bill. A: Well, it’s going to go bankrupt if they do pass the health care bill, too, but at least he’s thinking about it.” So we’ve got that going for us.

A question: If the guy accused of being the pants-on-fire would-be terrorist on Flight 253 is “cooperating” with investigators, as investigators say, then why are people calling for him to be tortured?

News flash: U.S. corporate governance sucks, at least at publicly held companies.

Another news flash: Sens. John McCain, R-Ariz., Lindsey Graham, R-S.C., and Joe Lieberman, I-Conn., send the president a letter asking him not to release six Guantanamo detainees to Yemen. Just one problem: too late. A big deal? Of course not. But imagine how this would have been played if three Democratic senators had done this with George W. Bush still in the White House.

The Washington Post’s Steven Pearlstein, unlike McCain, Graham and Lieberman, is NOT too late. Not that it helps: Indeed, he warned us a year ago that Obama’s choice of Mary Schapiro to run the SEC would suck. And it has come to pass as it was foretold.

Well, at least we’re going to have a national election contested on a clear issue: Newt Gingrich has been calling on Republican Congressional candidates in 2010 to pledge to repeal health-care reform (should it finally pass) if elected. Now the White House is double-dog-daring them to do it, too.

How to keep your recently deregulated, greedy, rapacious, out-of-control industry from being intelligently re-regulated: First, get the majority party to assign a bunch of politically vulnerable rookies, who will therefore be desperate for lots and lots of re-election campaign cash, to the committee that oversees you.

Worst financial footnote of the year: By the time this post sees the Interwebz, results should be posted.

Dennis Kucinich may see flying saucers, but he also sees some incredibly bad policy (if not actual crime) and is calling it out.

From the banksters’ own fingers: Some internal AIG e-mails are finally being made public. We need many, many more, and we need many, many people to go through them looking for evidence of crime.

All that, plus the sense God gave a billy goat: Minnesota Gov. Tim Pawlenty: anti-science and anti-gay, and therefore a viable GOP candidate for president in 2012.

Countdown: Scott Roeder, accused murderer of Dr. George Tiller, goes on trial Jan. 11, and he’s not going to be allowed to claim that it was legal to kill Tiller to protect innocent lives. Whoever shoots down an unarmed doctor in the middle of his church, without reason or provocation, should get the spike, period.

¡Brava, Ciudad de Mexico!: Mexico City legalizes gay marriage before New York City does. Of course, that’s because the New York State Senate is run by guys I would call bucketheads except that honest walruses everywhere would take exception.

Probably crap: That’s my assessment of Reuters’ claim that its article by Matthew Goldstein on hedge-fund trader Steven Cohen was killed on “journalistic grounds.” You don’t create an investigative team, put someone like Matthew Goldstein on it, assign it a story, nurse that story through the reporting and writing and editing, all the way through the lawyering, and THEN kill it on “journalistic grounds.” Yeah, sure, anything is possible, but by far the likeliest explanation is that something else is going on here that reflects quite poorly on Reuters.

When stupidity becomes a public-health issue: Anyone who would pay Michael Steele a dime to give a speech needs to be quarantined for the public’s good.

Revisionist history: Obama claims he never campaigned on the public option. Unfortunately for him, he did. I guess pointing this out makes me a hater. Oh, well, feel the hate, peeps.

Ten worst things about the 2000s, from Juan Cole. Hint: They all had to do with George Bush.

Three of the ten worst things about this week, captured by Digby in a single post.

The best argument I’ve seen for a public option: The retiring CEO of Cigna, Ed Hanway, is getting $73.2 million. And all he had to do for it was deny a little girl a liver transplant. Forget sick people; will no one think of the poor stockholders here? You can e-mail him your best wishes at H.Edward.Hanway@CIGNA.com. Seriously. I just tried it a few minutes ago, and it worked.*

Requiring people to buy private health insurance: constitutional or not?: Some bona-fide legal scholars have it out on that issue here.

This will be fun. This will be shooting fish in a barrel, with dynamite. But I repeat myself. Andrew Breitbart, who has a long history of not being able to find a fact with both hands and a flashlight, plans to start a media fact-checking Web site soon, thus providing conclusive evidence for my hypothesis that Andrew Breitbart is a liberal plot to make conservatives look stupid.

On the other hand, Digby hates America, or at least American pundits, although given the offense she identifies here, I have to say I hate them, too: “There seems to be an unfortunate requirement in American politics that when pundits and numbers crunchers read the tea leaves and determine to their satisfaction that the contest is over, those they’ve decided are going to lose are required to immediately capitulate, admit they were wrong and join in the celebration of the winner — even if the votes haven’t been cast or the cases haven’t been decided.”

Jiujitsu: Newt Gingrich has been urging Republicans to campaign next year on a pledge to repeal HCR in 2011 if it’s enacted. But Democrats are seeing that as a bad thing for Republicans and are urging their challengers for 2010 to get the GOP incumbents on the record about whether they intend to try to repeal HCR. Interesting.

For the win: Balloon Juice is having a contest tonight: Name the ten worst Washington Post columnists of the past decade. As it happens, I stumbled my personal No. 1, Charles Krauthammer, on TV earlier tonight. Sick bastard was complaining because we hadn’t gone to war against Iran already. That’s not just stupid, that’s Evil, the kind of Evil that deserves for its paralyzed ass to wake up in a foxhole surrounded by corpses with no weapon, no comrades in sight, no way to move and the enemy advancing with bayonets fixed. If Krauthammer wants blood that badly, let him drink his own.

Quote of the day, from Attackerman: “After all, systemic dysfunction doesn’t come from nowhere, and it usually has a constituency.” I don’t know that I’d call that a rule of investigative reporting, but it’s definitely worth remembering.

*I bet you’re wondering what I wrote. Well, I’ll tell you what I wrote. It was this: “Dear Ed: Best wishes on your retirement. I hope it’s a long one. You’re going to need a long one to think up an argument that St. Peter will buy. Love, Lex.” Really.

Tuesday, September 22, 2009 8:15 pm

Susan Antilla at Bloomberg has some suggestions about what we might do with the Securities & Exchange Commission, inasmuch as it is utterly failing to do its job, i.e., protect the interests of investors:

Shoot it like a horse with a broken leg. Problem is, to extend the metaphor, any new colts/fillies sired to replace it likely would have the same orthopedic problem. “There is a reason it is the way it is,” Antilla quotes Barbara Roper, director of investor protection at Consumer Federation of America and a member of the SEC’s Investor Advisory Committee, as saying, “and it’s because of the deference that Congress and various administrations have to the financial services industry.”

Move the enforcement division to where most other government enforcement is housed: the Justice Department. As Karl Rove and Alberto Gonzalez have shown us, it wouldn’t be completely immune from political pressure there, but it would be better protected there than it is now.

Appoint commissioners from the investment community, not the broker/dealer community. But again, you run into “the deference that Congress and various administrations have to the financial services industry.” Even if a president were bold enough to appoint them, the Senate would never confirm them.

And the deference goes even further:

In 2006, the SEC’s Office of Compliance Inspections and Examinations actually set up a hotline for firms that were feeling put out about being investigated. Amazingly, the hotline offers regulated firms “senior-level attorneys” to help resolve complaints.

The investing public, in the meantime, is relegated to filling out an online form when it has a complaint. An improved SEC might consider giving investors access to the top people and letting the brokerage firms sit there and fume if they don’t like the way they’re being treated.

There is one bright side: Current SEC chairwoman Mary Schapiro, in addition to being at best inept, may have a potentially fatal conflict-of-interest problem:

[Schapiro] was in charge of the self-regulators at the Financial Industry Regulatory Authority when the organization was staunchly defending the greatest gift ever to the brokerage industry: mandatory arbitration of investor disputes.

It’s worth noting that Finra is a defendant in three lawsuits dating from Schapiro’s tenure. One of them, by Standard Investment Chartered Inc., names Schapiro as a defendant and seeks to make unredacted versions of certain documents public. Those might wind up embarrassing the woman in charge of the SEC if they show that she misled brokerage firm members about the “special member payments” they got when Finra was formed in 2007.

You probably haven’t heard the last on this one: On Sept. 11, Standard and Finra heard from the court that the case had been assigned to Jed Rakoff.

Manhattan Federal Judge Jed Rakoff said the proposed settlement – over bonuses paid to Merrill Lynch executives just before the bank took over Merrill – was little more than a sham to “provide the SEC with the facade of enforcement and the management of the bank with a quick resolution to an embarrassing inquiry.”

“The notion that Bank of America shareholders, having been lied to blatantly in connection with the multibillion-dollar purchase of a huge, nearly bankrupt company, need to lose another $33 million … in order to ‘better assess the quality and performance of management’ is absurd,” the judge wrote in a scathing ruling.

The SEC sued Bank of America on Aug. 3, claiming bank bosses lied to shareholders when they asked for permission to buy the nearly bankrupt Merrill Lynch for $50 billion.

The SEC charged Bank of America signed off on a plan to pay up to $5.8 billion in bonuses to the executives who ran Merrill Lynch to the brink.

In statements to shareholders, Bank of America said it had not agreed to such bonuses.

The same day the SEC sued, regulators agreed to a settlement with Bank of America and the $33 million fine.

The SEC claimed such a fine would actually help shareholders – alerting them that bad decisions had been made and enabling them to better assess the quality of bank management.

Rakoff called the SEC’s logic “absurd” and told both sides to be ready for trial by Feb. 1, 2010.

Quoting Oscar Wilde – who once said a cynic is someone “who knows the price of everything and the value of nothing” – the judge said the settlement suggested a “cynical relationship” between the bank and the SEC.

“The SEC gets to claim that it is exposing wrongdoing on the part of Bank of America in a high-profile merger; the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators,” the judge wrote.

He added that “all this is done at the expense, not only of the shareholders, but also of the truth.”

Good luck with that, Lynn. Our government is held in thrall by the entities, and people, it is supposed to be regulating, so the taxpayers get screwed and investors get screwed twice.

Ken Lewis would have thought twice about withholding that info about bonuses for Merrill Lynch people from his shareholders if he had known that that bit of subterfuge would have cost him prison time … as it should have.

Thursday, May 7, 2009 8:48 pm

Shorter Government Accountability Office: The Securities & Exchange Commission doesn’t have enough lawyers, paralegals, support staff, money, copiers, computers, or much of anything else; it’s difficult to catch guilty parties, even more difficult to punish them and more difficult yet to actually collect the fines once they’re punished; the commissioners themselves don’t give much of a damn; and there’s nothing in place to prevent another disastrous bubble from happening.

(OK, that’s not all that short. But the actual report is 60-some scary and depressing pages.)